Ratings Agency Egan-Jones Downgrades US Debt

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Sean Egan, president of Egan-Jones Ratings Co. (Getty Images)Ratings agency Egan-Jones has downgraded its credit rating for US debt one level -- to AA- from AA -- the Associated Press reports.

According to Bloomberg, Egan-Jones cited "the potential for the Federal Reserve's third round of large-scale asset purchases to weaken the dollar and drive up inflation," without significantly raising the country's real gross domestic product.

"From 2006 to present," the ratings agency said in a note, "the US's debt to GDP rose from 66% to 104% and will probably rise to 110% a year from today under current circumstances; the annual budget deficit is 8%."

"In comparison, Spain has a debt to GDP of 68.5% and an annual budget deficit of 8.5%."

According to CNBC, in April Egan-Jones cut its U.S. credit rating from AA to AA+ "with a negative watch." Back then, the reason given was failure to move toward deficit reduction.

Founded in 1995, Philadelphia-based Egan-Jones is a Nationally Recognized Statistical Rating Organization, accredited by the Securities and Exchange Commission since 2007. NRSRO status means that the SEC considers an agency "'nationally recognized' in the United States as an issuer of credible and reliable ratings by the predominant users of securities ratings" (in the words of guidelines proposed in March 2005, since superseded). Other NRSROs include the better-known Moody's (MCO), Standard & Poor's and Fitch Ratings.

Egan-Jones was the first NRSRO to downgrade the United States, dropping the country's sovereign debt from AAA to AA+ on July 16, 2011. "The major factor driving credit quality is the relatively high level of debt and the difficulty in significantly cutting spending," the firm said at the time.

S&P soon followed Egan-Jones's lead, cutting its U.S. credit rating from AAA to AA+ on August 5, 2011; Moody's and Fitch changed their outlooks to negative in June and November, respectively, though both kept their ratings at triple-A.

Egan-Jones was also the first to downgrade Enron and WorldCom, two of corporate history's most notorious failures.

Unlike its larger peers in the credit-rating business, which are compensated by Wall Street companies that issue securities, Egan-Jones is paid by investors. The firm touts this investor-supported structure as a means of avoiding conflicts of interest, which plagued the industry in the run-up to the 2008 financial crisis, when highly dubious securities being peddled by investment banks were often granted triple-A status.

According to the AP, Egan-Jones founder and president Sean Egan "has long railed against the power of the three major ratings agencies."



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mddiesels

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February 22 2013 at 7:35 AM Report abuse rate up rate down Reply
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January 29 2013 at 7:17 PM Report abuse rate up rate down Reply
ha6ai

The Obama-Democrat Economic disaster continues to unravel.

September 17 2012 at 11:18 PM Report abuse +1 rate up rate down Reply
lastempfer

These rating abency people are idiots. There is more demand for U.S. Treasuries than the government can print. The yeilds are lowest in history. These people should be all thrown in jail. They are the same idiots that were responsible for and enabled banks and Wall Street crooks to sell off junk mortgages as A paper to unsuspecting investors. They have some kind of hidden agenda and should be dismantled.

September 17 2012 at 9:46 AM Report abuse -2 rate up rate down Reply
Frankie

Once again, thanks republicans. You're "hoping America Fails" is working.

September 17 2012 at 1:23 AM Report abuse -1 rate up rate down Reply
pdbliz

I JUST SEEN OLD UGLY NANCY ON NET,,,,WOW,,,SHE IS AGING FAST,,,,POOR THING,,,I GUESS SHE IS ALSO WORRIED ABOUT ALL HER MONEY.... SHE IS ALSO A 1% ER.......SAME AS OLD DIRTY HARRY REED....

September 16 2012 at 7:11 PM Report abuse +1 rate up rate down Reply
pdbliz

ALL OF US CAN THROW NEGITIVE VIEWS AT EACH OTHER...............BUT,,BE HONEST,,,,I DO THINK BOTH PARTIES HAVE ENOUGH FAUGHTS TO GIVE BLAME,,,,,,,,BUT,,ONE HAS MORE THAN THE OTHER...
REPUBLICANS DID HAVE GOD,,,,IN THE FORUM,,,,,,,,,,,THE DEMOCRATES HAD TO VOTE FOR HIM,,,,AND,,,3 TIMES AT THAT.!!!!!!!

September 16 2012 at 6:50 PM Report abuse +1 rate up rate down Reply
pdbliz

IF YOU GET DOWN TO BRASS TACKS,,,,,,,,,,,,,OBAMA IS BI RACIAL..........SO,,,HE IS NOT THE FIRST FULL BLACK PRESIDENT..........HE IS 50% WHITE,,,,,,50 % BLACK......
AND,,,HE DIS OWNED THE WHITE SIDE OF HIM,,,ACORDING TO HIS BOOK,,,,,,YEARS AGO.!!!!!
AND,,,OBAMA IS A 1% .ER..............HE IS A MILLIONAIRE,,,,,,SO,,DOES HE PAY HIS FAIR SHARE ALSO.!!!

September 16 2012 at 6:48 PM Report abuse rate up rate down Reply
TED

Your a great job (o) creit rating had never gone down and you've manage to do twice in one year. Just a little more and you'll be down with us little. You're DESTROYING OUR GREAT COUNTRY AND HAVE NO IDEA WHAT YOU'RE DOING. You've made history by being the first black president now get out.

September 16 2012 at 6:21 PM Report abuse -3 rate up rate down Reply
factuals

It never happened before under any other administration .......of course ...we now have regime that has no clue or idea of business....we are ready to implode

September 16 2012 at 4:42 PM Report abuse -1 rate up rate down Reply